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By XE Market Analysis July 18, 2018 3:21 pm
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    XE Market Analysis: Asia - Jul 18, 2018

    The Dollar index lost a little ground in N.Y. trade on Wednesday, touching 94.99 lows after opening at 95.31, a three-week high. Weaker U.S. housing starts dented USD sentiment to a degree, while the remainder of losses came on the back of light profit taking. EUR-USD topped at 1.1662, while USD-JPY dipped to a low of 112.72. USD-CAD eased to 1.3170 lows, while Cable recovered toward 1.3170.

    [EUR, USD]
    EUR-USD was on the rise through much of the N.Y. session, opening at 1.1602, a near three-week low, then later peaking at 1.1662 into the London close. Sellers reportedly stepped in ahead of the 20-day moving average, which sits currently at 1.1668. The pairing has since fallen back to 1.1645 lows. Given the divergent policy paths of the Fed and ECB, and strong U.S. economic growth, we see further downside room for EUR-USD.

    [USD, JPY]
    USD-JPY was pushed to 112.72 lows ahead of the U.S. housing data, from pre-N.Y. open highs of 113.03. Selling reportedly came from option backed accounts, ahead of the expiry of 113.00 strikes at 10:00 ET. The pairing later inched up to 112.88, though remained in a narrow range into the close.

    [GBP, USD]
    Sterling dove with UK yields on the inflation miss in UK data. Cable hit a low of 1.3009, the lowest level seen since last September. UK June CPI unexpectedly held unchanged at 2.4% y/y versus the median forecast for a rise to 2.6% y/y, while core CPI fell to 1.9% y/y from 2.1% y/y in May. The data reduced the odds for the BoE to tighten at the August MPC meeting. BoE Governor Carney yesterday warned of "big economic consequences" to the economy in the event of a no-deal exit from the EU.

    [USD, CHF]
    EUR-CHF has settled back in the mid 1.1600s, down from the eight-week high seen earlier in the week at 1.1714. SNB's Maechler said late last month that the Franc "remains highly valued" despite the depreciation seen over the last year, arguing that "we are in extraordinary times and we are using unconventional measures." The comments affirm that the SNB is firmly on hold, with Maechler admitting that the SNB's monetary policy room for manoeuvre is "necessarily" affected by the actions of ECB and Fed.

    [USD, CAD]
    USD-CAD topped at three-week highs of 1.3259 at the North American open, before pulling back to 1.3228 lows at mid-morning. Commodity price weakness, specifically oil and gold, have supported the pairing of late. WTI crude remains near one month lows, trading in the mid-$67 range, while gold is on one-year lows, under $1,225.00. Later, the pairing pulled back to session lows of 1.3170, as reports that the U.S. may want to negotiate trade deals separately with Canada and Mexico made the rounds. This had been floated back in June, but kind of never went anywhere. As for the Peso, USD-MXN slipped to 18.807 lows from 19.040.

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